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Investing.com - Bernstein SocGen Group initiated coverage on Vallourec (EPA:VLLP) SA (EPA:VK) with an Outperform rating and a price target of EUR22.60, citing strong free cash flow yield and potential pricing power. According to InvestingPro data, the company has demonstrated robust performance with a 25.91% year-to-date return and maintains a healthy 8.07% dividend yield.
The steel pipe manufacturer’s stock is down approximately 2% year-to-date, which includes the payment of a EUR1.5 dividend distributed on May 28, according to Bernstein analyst Guillaume Delaby.
Bernstein sees significant value in Vallourec shares, highlighting a free cash flow yield exceeding 10% and a distribution yield of more than 8%, while the stock currently trades at 4.9x FV25e EBITDA, representing a 25-30% discount to its long-term EV/EBITDA ratio of 6.5x.
The firm forecasts Vallourec’s average EV/EBITDA for 2025-28 at 4.09x and notes the company is now debt-free, positioning it as "a more aggressive way to capitalize on upcoming surprises on the pricing power front."
Bernstein expects Vallourec would outperform competitor Tenaris (BIT:TENR) in any "significantly better-than-expected positive environment," according to the research note.
In other recent news, Morgan Stanley (NYSE:MS) initiated coverage on Vallourec SA with an Equalweight rating and set a price target of €19.50. Analysts from Morgan Stanley highlighted Vallourec’s involvement in the premium high-value add category of the oil market, noting that it presents less volatility compared to its peers. However, they pointed out that Vallourec’s Oil Country Tubular Goods (OCTG) sector is more susceptible to short-term oil market dynamics. The analysts also mentioned that their forecasts for Vallourec align with the consensus for the coming years, suggesting limited upside potential in the current market environment. While there have been no indications of ArcelorMittal (NYSE:MT) increasing its stake in Vallourec, Morgan Stanley noted that this potential could offer some downside protection. Vallourec’s margins have now aligned with those of Tenaris, which may lead to a narrowing of the current 20% discount. These developments reflect the analysts’ cautious yet balanced outlook on Vallourec’s future prospects.
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